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I have a few questions 1) Do I pay less taxes as an S-Corp

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I have a few questions: 1)...
I have a few questions:
1) Do I pay less taxes as an S-Corp for Capital Gains on profits from stock trading then as an individual with an S-Corp
2) If I have an S-Corp for my Stock trading and I have no employees, can I take profits when ever I want and am I restricted as to how I take profits from my company that I create?
3) By owning an S-Corp, if all of my money is in the S-Corp am I protected from any personal liabiltiy if I were sued. I am a psychologist and there may be times in my career that I am vulnerable to being sued.
Submitted: 6 years ago.Category: Tax
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Answered in 2 minutes by:
10/2/2011
Tax Professional: Stephen G., Sr Income Tax Expert replied 6 years ago
Stephen G.
Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 7,239
Experience: Extensive Experience with Tax, Financial & Estate Issues
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Stephen E. Grizey :

Hi & thanks for using our service. I'll do my best to give you a complete & accurate answer. Please ask me to clarify anything you don't understand.

Stephen E. Grizey :

The purpose of the S-Corp election (& it is a tax election that a regular C-Corporation makes not a separate type of corporation) is to pass-through the income to the owners to be taxed at the individual level. The items of income maintain their character as they are passed through; so short-term capital gains are passed through & are taxes as short-term capital gains on your individual tax return.

Stephen E. Grizey :

You would not be restricted as to how you take profits, although you would have to deal with the owner's compensation issues in terms of the income; in other words would you be taking a salary subject to social security taxes, which of course is counter productive to what you're trying to do.

Customer :

ok.

Customer :

How about the Sole Propritorship, from what I understand this does not protect your personal assets, but social security taxes would not be an issue, right?

Stephen E. Grizey :

As far as your assets being protected if they are within an S-Corp let me ask you this "Would you allow yourself to be forced into bankruptcy while at the same time holding assets in your S-corp?" Since everything in terms of income, etc. is passed through to you for tax purposes, whether distributed or not, as an S-Corp., which you control, tends to be viewed as an extension of you; for example the S-Corp. stock that you hold, which in the circumstances that you describe, would be subject to any of your obligations & it would be valued based upon the assets of the S-Corporation, so in that way the assets could be exposed to your personal liabilities.

Stephen E. Grizey :

A sole proprietorship is operating as an individual.

Customer :

Would you allow yourself to be forced into bankruptcy while at the same time holding assets in your S-corp?

Customer :

I'm not sure

Customer :

I gues it would depend on the situation

Stephen E. Grizey :

You are kind of going at the problem in reverse. The idea would be to isolated the risk area in a corporation, such as a professional corporation, in order to protect your personal assets.

Customer :

I guess my question is then, in your opinion, is it worth it to run a business with stock trading?

Customer :

Ok, I see what you're trying to say

Customer :

In that case anything I do as a Psychologist I would definately do it under a corporation

Customer :

However, as a stock trader it probably is not necessary, however, I thought trading under a corporation would be better for tax purposes.

Stephen E. Grizey :

However, the best & most cost effective way of protecting your assets as well as defending against any potential liabilities from your professional practice is through professional liability insurance; in this day & age, it is really a necessary expense of any professional practice; to operate "bare", is not prudent as just the cost of defending against any potential malpractice suit can wipe you out these days; that goes for any professional, CPAs, attorneys, health care professionals, etc.

Customer :

I do have professional liability insurance.

Stephen E. Grizey :

No. Trading securities in any type of a corporation would offer no real tax benefits unless you were talking about serious money & leaving it the corporate entity, funding retirement plans, etc.

Stephen E. Grizey :

Make sure your professional liability insurance is adequate, covers defense, etc.

Customer :

Ok, I will double check the insurance. I think you have answered my questions about the Trading. Thanks for your time.

Stephen E. Grizey :

From a practical standpoint it is very difficult to protect any personal assets that you maintain CONTROL over.

Stephen E. Grizey :

Please remember to "ACCEPT". Feedback, if you have time & bonuses where you think they are warranted are always most appreciated. I'll be happy to answer any follow-up questions you may have.

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